What Classes & Levels Do (Briefly)

Classes and Levels are tools of organization. Levels organize by splitting things apart and putting the parts in a hierarchy. Classes organize by gathering parts together and lumping them together into a distinct whole entity of an archetypal or iconic sort. Splitting and lumping; that's what they do.

So, what you want to ask when considering them is to ask what you want to lump or split, and why. Just having them is nothing more than taking up a Cargo Cult mentality of "When Gygax and Arneson did it, they succeeded. We want to succeed too, so we do it." and then wonder why folks (like me) go "It's just D&D with house rules." and ignore it. (Dressing it up never helps.)

No, you need to pretend to be an architect or engineer and think through what you want to do and how to do it. Don't worry about mistakes; worry about learning from them--fail faster--and implement revisions quickly.

Classes are a lumping of traits which, combined, form a whole intended to be discrete playable entities. This includes D&D's (and its clones and derivatives) classes, templates (TORG, Feng Shui), and soft "types" (as in Champions and other point-build games). The discrete unit allows users to quickly figure out what that character can and cannot do, much as discrete vehicle models or software programs do; it is a thing inherited from wargames.

Levels split things apart to establish a hierarchy within those parts. You want to use this tool to take things that should be so arranged. Wargames used them to arranged power gradients, so when fantasy wargames arose magic got put into levels to arrange spell potency in that manner to go with hero and commander potency hierarchies. It works well when used as intended.

Misusing Classes happens when you proliferate them past the quantity that your game requires, usually meaning that your class design is too rigid; we see this when "Archer" and "Knight" are both distinct mechanical constructs and swapping between them is too difficult or impossible. (D&D did this right: "Fighter" allows both archetypes, and for one character to do both without unneeded mechanics to swap between them.)

Misusing Levels happens when you fail to establish a hierarchy that exists in the milieu; if a character can't perceive what "level" represents as he can perceive gravity, then you're doing it wrong (and many of you, for decades, have). Using levels for a metagame purpose, such as to lock off content, is a cheap and lazy shortcut that's better done all-around using more fitting alternatives.

I leave to you how specific implementations succeed or fail to use these properly.